Greek bailout tops EU finance ministers' agenda

Finance ministers from countries using the euro hope to agree on Monday on a way of providing heavily indebted Greece with financial aid, despite French and German doubts that a deal will be reached.

European policymakers are discussing how to help Greece and protect the 16-country currency zone but so far have not backed promises of political support with financial aid. Germany, Europe's biggest economy, has resisted bailout pledges.

European Union leaders have welcomed austerity measures announced by the Greek government and a poll on Sunday showed most Greeks saw them as a step in the right direction, despite the street protests they have provoked.

A senior EU source told Reuters at the weekend that among the means being considered to help Greece were bilateral loans and loan guarantees.

French Economy Minister Christine Lagarde said she did not expect any figure for aid to be announced at Monday's monthly meeting of the Eurogroup finance ministers in Brussels.

I'm certainly not expecting any decision being made, or any button being pressed, or any button being selected to be pressed, because it's totally premature, she told reporters in New York.

Despite this, she said Greece had delivered enormously with its austerity steps which include promised spending cuts equal to 2 percent of gross domestic product.

Under EU rules, neither the bloc as a whole nor individual member states can assume the debts of other countries.

The Greek government deserves great respect for its savings efforts, Finance Minister Wolfgang Schaeuble told the German newspaper Bild. But there are no new factors. Therefore, there is no reason to take decisions on financial aid on Monday.

On Saturday, Britain's Guardian newspaper quoted sources as saying Monday's meeting would agree to make up to 25 billion euros of support available. The senior EU source told Reuters no figures were likely at this stage.

FRAMEWORK MECHANISM

I think we should be able to agree on principles of a euro area facility for coordinated assistance. The (executive) European Commission and the Eurogroup task force would have the mandate to finalize the work, the source said.

He said they would discuss the principles and parameters of a facility or mechanism that could be activated if needed and requested, but no figure had been agreed.

You would have a framework mechanism and you would have blank spaces for the numbers because there has been no request (from Greece) yet, the source said.

Greece hopes to reduce its budget deficit this year to 8.7 percent of GDP from 12.7 percent in 2009, a plan that has led to protests and strikes .

However, just over half the 1,008 people surveyed for the Greek newspaper Ethnows said last week's 4.8 billion euro ($6.6 billion) package went in the right direction, while 41.9 said it did not. Many said unions should tone down their opposition.

Ewald Nowotny, a member of the governing council of the European Central Bank, said on Austrian television on Sunday Greece should show it has taken steps to get its public finances in order before external help can be given.

Those who are members of the club should keep to the rules, Nowotny said. That means when individual states -- and this would be the case with Greece, get into problems -- then the first responsibility to repair them lies with the states themselves.

The austerity plan has reduced market concern over whether Greece will be able to service its debt and helped Athens sell its bonds with ease on debt markets earlier this month.

Policymakers are still searching for ways of making its cost of borrowing -- still far above that of other Europeans -- more sustainable.

They are also concerned that the problems in Greece could undermine confidence in the euro and spread to other heavily indebted euro zone countries such as Portugal or Spain.

Speaking more generally about the euro zone, Nowotny said member states should start consolidating their budgets soon.

The longer member states wait, the more painful the measures which are needed shall be, he said.

(Additional reporting by Sarah Marsh in Berlin and Sylvia Westall in Vienna; editing by Timothy Heritage)

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